Sonntag, 30. Juni 2013

A federal
appeals court will be asked to reverse a Baton Rouge federal judge's dismissal of a
lawsuit that claims the Securities and Exchange Commission and a former
official knew of Robert Allen Stanford's $7 billion fraud scheme but failed to
investigate and stop it, an attorney for some victims said Friday.

The suit,
filed in July by seven Baton Rouge residents and firms, was thrown out
June 21 by U.S. District Judge Shelly Dick at the request of the federal
government, which argued the SEC enjoys complete discretion in deciding what
matters to investigate.

The suit
alleges that Spencer Barasch, a former SEC regional enforcement director in Fort Worth, Texas, was negligent and engaged in
deliberate misconduct in failing to investigate the scheme before investors
suffered losses. The suit contends Barasch knew of the Stanford scheme but
refused to probe it, allowing the continued defrauding of investors.

In his
written ruling, Dick called Barasch's alleged conduct "disturbing" but
said the law supports the government's position that there was no statute,
regulation or policy that required Barasch to make an enforcement referral to
either the National Association of Securities Dealers or the Texas State
Securities Board.

"While
the court sympathizes with the losses suffered by the plaintiffs in this
matter, plaintiffs have failed to identify any mandatory obligations violated
by SEC employees in the performance of their discretionary duties," the
judge wrote.

Ed
Gonzales, an attorney for the seven Baton Rouge residents and firms who filed suit
in federal district court in Baton Rouge, said an appeal will be filed at
the 5th U.S. Circuit Court of Appeals in New Orleans. Those plaintiffs say they lost
roughly $3.5 million to the scheme.

Dick's
ruling described the suit's plaintiffs as victims of a Ponzi scheme who lost
their investments in Stanford International Bank Ltd.

The suit
alleges the SEC knew in 1997 that Stanford was operating a fraudulent scheme
and failed to stop him until February 2009.

Robert
Stanford, 63, of Houston, is serving a 110-year prison sentence for a
fraud conviction that followed estimated worldwide losses of approximately $7
billion. About $1 billion of those losses were from about 1,000 investors in
the Baton
Rouge, Lafayette and Covington areas, according to estimates by
state Sen. Bodi White, R-Central, and Baton Rouge attorney Phil Preis, who represents
numerous Stanford victims in another lawsuit.

A Ponzi
scheme is a fake investment program. Illegal operators skim most of the money
provided by people who believe they are investors.

Early
investors receive dividends that actually are small portions of their personal
funds and those of later investors. Stanford's Ponzi scheme attracted
investment money for his Stanford International Bank on the Caribbeanisland of Antigua.

There are
more than 20,000 Stanford victims across more than 100 countries.

Freitag, 21. Juni 2013

A Louisiana
judge Friday threw out a putative class action alleging the U.S. Securities and
Exchange Commission facilitated Robert Allen Stanford's $7 billion Ponzi
scheme, finding the agency was shielded by a law barring suits over federal
officials' discretionary choices.

U.S. District
Shelly D. Dick said the discretionary function exception of the Federal Tort
Claims Act applied to the case brought by victims of Stanford in part because
the alleged refusal of former official Spencer Barasch in the SEC's Fort Worth,
Texas, office to investigate the Ponzi scheme was a matter of choice.

"While
the Court sympathizes with the losses suffered by the plaintiffs in this
matter, plaintiffs have failed to identify any mandatory obligations violated
by SEC employees in the performance of their discretionary duties," Judge
Dick concluded in granting the government's motion to dismiss.

"Plaintiff[s]
have also failed to allege facts demonstrating that the challenged actions are
not grounded in public policy considerations," she said.

The
plaintiffs argued that Barasch's alleged conduct did not fall under the discretionary
function exception because the SEC has a policy of making enforcement referrals
to the National Association of Securities Dealers and the Texas State
Securities Board. Therefore, if a decision was made to refer Stanford, and then
not followed, that decision falls outside the discretionary function exception.

But Judge
Dick rejected that argument, saying that while "the alleged conduct of
Barasch is disturbing... the FTCA clearly states that the discretionary
function exception applies 'whether or not the discretion involved be abused.'"

The suit,
which was filed in July under the FTCA, alleged that SEC employees in Fort
Worth knew as early as 1997 - only two years after Stanford Group Co. registered
with the agency - that the company was likely operating a Ponzi scheme and did
nothing about it.

Former SEC
regional enforcement director Barasch, now an attorney with Andrews Kurth LLP,
was singled out in the complaint for failing in his duties.

"In 1998
[to NASD] and again in 2002 [to TSSB] the SEC - through enforcement director
Barasch and others - reached the conclusion that referrals should be made. Barasch
himself was designated to perform these tasks," the complaint said. "But,
in fact, these referrals were not made, with the effect that Stanford escaped
scrutiny by other agencies for years, thus facilitating Stanford's scheme to
defraud."

In
dismissing the case, Judge Dick cited a similar decision by a Texas federal
judge in another case brought against the SEC over Stanford's scheme. The plaintiffs
in Dartez v. U.S. had argued that Barasch's decisions and the negligent
supervision of his superiors were not protected policy considerations.

"While
the [Dartez] decision is not binding on this Court, the Court can find no flaw
in [its] reasoning," Judge Dick said.

Dienstag, 4. Juni 2013

A group of holders of Stanford Financial Group CD accounts
claims that Willis Group Holdings Public Limited Co. helped
perpetuate Robert Allen Stanford's $7 billion Ponzi scheme,
according to an $83.5 million class action removed from
Florida state court Monday.

The plaintiffs, 64 citizens of El Salvador, Nicaragua,
Panama, the United States and Spain who claim combined losses
of more than $83.5 million, say that when they made their
investments in Stanford Financial CDs, they relied on "safety
and soundness" letters issued by Willis asserting that
Stanford International Bank and its products were protected by
certain insurance policies and were highly liquid.

"In fact, the Stanford Financial CDs were not CDs at all, but
unregistered, unregulated securities sold illegally from
Stanford Financial's home base in the United States," the
plaintiffs say in their complaint. "These investments had no
insurance and were fraught with risk."

The case is not the first to lay such accusations against
Willis. In 2009, a class of between 1,200 and 5,000 Venezuelan
clients sought $1.6 billion over claims they were allegedly
lured into the scheme by the insurance brokers' assurance
that Stanford CDs were sound, insured investments. And in
another suit that year, Mexican investors implicated Willis,
claiming the defendants contributed to a fraud that cost them
roughly $1 billion.

Stanford was sentenced in June 2012 to 110 years in prison
after being convicted on charges he misappropriated billions
of dollars in investor funds, including some $1.6 billion he
allegedly moved to a personal account. His $7 billion Ponzi
scheme was second only to Bernie Madoff's record-setting
scam.

From about August 2004 through 2008, Willis provided Stanford
Financial with an undated form letter that said Willis was
the insurance broker for Stanford International Bank and had
placed directors and officers liability insurance and a
bankers blanket bond with Lloyds of London, according to the
current complaint.

The letters played a crucial role in Stanford's fraud because
Stanford Finanical was an offshore bank and thus not insured
by the Federal Deposit Insurance Corp. Willis' letters helped
Stanford get around that obstacle by claiming the CDs "were
even safer than U.S. Bank-issued CDs because of the unique
insurance policies Willis had obtained," the complaint says.

"The Willis letters were specifically designed to win
investors' trust and confidence in Stanford Financial's fraudulent
scheme," the plaintiffs say in their complaint, noting that
for investors with more than $1 million in their accounts,
Stanford Financial advisors could get personally addressed
letters from Willis.

"Willis' message to potential investors was this: Trust us, you can invest with confidence and security in Stanford
Financial CDs," they add.

All of the plaintiffs in the current case made their purchases through Stanford Financial's Miami office, which the
complaint says accounted for more than $1 billion in CD sales.

Willis of Colorado Inc. filed the notice of removal of the
class action on the grounds of diversity between plaintiffs
and defendants, of the Securities Litigation Uniform
Standards Act of 1998 and that the Northern District of Texas has
exclusive jurisdiction in Stanford receivership cases.

The notice of removal also claims that defendants Willis
Group Holdings Public Limited Co. and Willis Ltd., which are
based in Ireland and the United Kingdom, respectively, have
been fraudulently joined in an effort to defeat diversity
jurisdiction. It says that the plaintiffs' claims are on
letters issued only by the subsidiary Willis of Colorado and
"no reasonable possibility" exists of the plaintiffs
recovering damages from the other entities.

Counsel for both sides could not be reached for comment late Tuesday.

The plaintiffs are represented by Luis Delgado and
Christopher King of Homer & Bonner PA and Ervin Gonzalez of Colson
Hicks Eidson PA.

Willis is represented by Edward Soto of Weil Gotshal & Manges LLP.

The case is Nuila de Gadala-Maria et al. v. Willis Group
Holdings Public Limited Co., case number 1:13-cv-21989, in the
U.S. District Court for the Southern District of Florida.